Spain: Fine Risk for Holiday Lets

A recent article in The Daily Telegraph highlighted that property owners in Spain cannot legally let their property without a special licence. In many areas of Spain, even if the licence is applied for, it is rarely granted.

Of course, property owners cannot know whether a licence will be granted or denied until they apply. If the licence is not granted, the owner can no longer continue renting the property ‘under the radar’ as the vast majority currently do. Hence, most owners never apply for a licence, certain that it will be denied anyway.

This practice may no longer be viable, however, as a fresh crackdown by Spanish tourism and tax authorities over unlicensed apartments and villas threaten homeowners with fines of up to €30,000.

“There are strict conditions before properties are approved for rental to holidaymakers,” says a spokesperson for the Spanish Ministry for Tourism. Properties that are licensed can expect inspections, health and safety checks etc. However, nearly all are not licensed, which means letting them to tourists is illegal.”

Richard Spiegal from holiday rental portal Espana Breaks said, “Most owners would have no problem if the authorities just issued licenses. In fact most would benefit from a set of consistent standards to follow. In Menorca they were taking a more pragmatic approach and allowing people to submit licence applications with every possibility of them getting passed. This means cash for local estate agents/architects (who do the paperwork) and legal renting which means quality tourists. It all depends which approach each region takes.”

Many homeowners rely on holiday rental income to pay the mortgage on their home in Spain. If this source of income is no longer available or worse, carries a real risk of financial penalty, many may be compelled to sell the property itself. Knowing that a property now takes an average of 39 months to sell in Spain, many homeowners face a very difficult choice between :

• Continue to rent and accept the risk of a substantial fine
• Stop renting and apply for a licence to do so legally
• Attempt to sell the property in a difficult market

Richard Spiegal believes that most homeowners would opt to let their property ‘legally’ if given a real option of doing so.